Optimism Boosts Brokerage Stocks

Brokerage stocks surged Friday, led by discount players such as Charles Schwab Corp., as investors pinned hopes of an improving economy on big financial companies that benefit from stock market strength.

Schwab (ticker symbol: SCH) rose $1.24 to $18.09, while its smaller rival E-Trade Group Inc. (ET) was up $1.19 to $12.29. Shares in those companies have jumped more than 16% since Tuesday.

Wall Street brokerages did well across the board, with Morgan Stanley Dean Witter (MWD) up $2.82 to $59.64 and Merrill Lynch & Co. (MER) up $2.98 to $56.64. Investment banks Goldman Sachs Group (GS), up $4.30 to $96.75 and Lehman Bros. Holdings Inc. (LEH), up $2.55 to $69.01, also were significantly higher.

“If you want to play a rebound in the market, these are the names you want to play,” said Ken Worthington, an analyst at CIBC World Markets.

Another factor contributing to the surging share prices was an upgrade of the brokerage sector by Prudential Securities on Friday. Analyst David Trone raised his rating on the group to “market outperform” from “market perform,” and said he expects to see the economy climbing out of recession this year.